The owners of Texas Industries Inc. (TXI:US) are exploring a sale of the Dallas-based building materials company, three people with knowledge of the matter said. The shares jumped the most in 17 months.
The cement company is working with Citigroup Inc. to find a buyer, the people said, asking not to be identified because the information is private. Texas Industries, whose market value was $1.9 billion at today’s close, may draw interest from competitors including Vulcan Materials Co. (VMC:US), one person said.
Southeastern Asset Management Inc. and NNS Holding, the two largest shareholders, have been looking to sell their stakes for some time, though they may struggle to get a price they deem sufficient, one person said. The two investors combined own (TXI:US) more than 51 percent of the company, according to data compiled by Bloomberg. NNS Holding is an investment vehicle for Egyptian billionaire Nassef Sawiris.
“The timing of this move is interesting,” Todd Vencil, an analyst at Sterne, Agee & Leach Inc., said today in a note to clients. “While the cement markets in which Texas Industries plays are clearly improving, the company is a long way from generating peak -– or even mid-cycle -– profits.”
Spokesmen for Texas Industries and Southeastern Asset didn’t return calls seeking comment. Atisthan Roach, a spokeswoman for Vulcan, declined to comment. An official at NNS Holding couldn’t be reached for comment.
Holcim Ltd. (HOLN) of Switzerland also may be a potential suitor, two of the people said. A Holcim spokesman, Peter Stopfer, said the company isn’t interested at the moment.
Texas Industries climbed (TXI:US) 14 percent to $66.47 at the close in New York, the biggest gain since July 2012. The shares gained 15 percent this year through yesterday. Birmingham, Alabama-based Vulcan rose 3.2 percent to $56.13.
Vencil, who is based in Birmingham, said applying a multiple of 10 times his per-share estimate for 2017 earnings before interest, taxes, depreciation and amortization would imply a sale price of at least $78. He rates (TXI:US) the stock as neutral.
TXI, whose operations in Texas and California put it in the two largest U.S. cement markets, is benefiting from a construction rebound. U.S. new-home sales jumped 25 percent in October from the previous month and earlier this year reached the highest level since 2008. Growth in construction spending should spur the U.S. building materials industry next year, Fitch Ratings said in a report yesterday.
TXI’s Ebitda more than doubled to $37.8 million in the three months through August on higher sales, the company said in October.
For Holcim, a purchase of TXI would give the Jona, Switzerland-based company a stronger foothold in North America, where it got only 15 percent of its $21.5 billion in revenue last year, according to data compiled by Bloomberg.
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